STATE OIL COMPANY OF AZERBAIJAN - ENERGY MARKET LEADER

 

Through the last three years, Azerbaijan's economy was growing at world unmatched rates: the GDP jumped 26 % during 2005, 35%b in 2006 and approximately 40% during the 1Q2007. The commercial production is growing up as well, some 39% during 1Q2007 alone.

The oil production is growing up across the country, Azerbaijan's production during 2007 shall total 42-43 MT, and in 2008 Baku-Tbilisi-Ceyhan pipeline shall transfer 50MT of Azerbaijani oil.

Thanks to the major oil&gas projects initiated by Azerbaijan's National Leader Heydar Aliyev the republic actually turned from a young state into regional leader.

The world-unmatched rates of economic growth of Azerbaijan, oil&gas reserves, transportation infrastructure, as well as global and EU's energy security resulted in a formation of the region's largest vert6ically integrated petroleum company.

 

Putting the oil strategy of Azerbaijan's national leader Heydar Aliyev in practice, following the global project Baku-Tbilisi-Ceyhan and Baku-Tbilisi-Erzurum, the State Oil Company of Azerbaijan (SOCAR) is implementing new projects aimed at international recognition.

SOCAR's level of development enables it to implement these plans. At the moment the Company is extending its presence in the region and in Europe. SOCAR is implementing its first projects in Georgia, Turkey and Romania through its representative offices.

These activities are intended to reinforce SOCAR's positions in the international relations system as well as extend the possibility of its joint export operations from the coasts of the Black and Mediterranean seas. Azerbaijan's advantageous geography enables successfully competing in this market.

With this purpose the State Oil Company of Azerbaijan intends to install oil refineries in Georgia and Turkey to process its oil and thus create a high added value for its production at the global markets. 200 hectares of area for the future oil refinery plant (ORP) is in the close proximity from onshore Kulevi Terminal purchased by SOCAR.

The capacity of this new purchase used to receive, store and ship oil, diesel fuel and black oil is 10 MT per annum (3 MT of oil, 3 MT of diesel fuel and 4 MT of black oil). The total capacity of tank farm is 320,000 cubic meters. SOCAR's nearest plans include extending the terminal capacity to 15-20 MT and tank farm capacity to 380,000 cubic meters. The terminal is able to receive 168 tank cars at the same time, through four railway branches.

A canal for tankers and three piers have been installed at the terminal. Kulevi Terminal also incorporates a world-class lab for oil and oil products testing and mobile service fleet of 9 vessels. 

At the moment the railway branch and special bridge to load liquefied gas are being installed by SOCAR. The terminal shall be commissioned in the second half 2007.

In Turkey, the State Oil Company of Azerbaijan has already submitted the application for construction of the state-of-the-art oil refinery plant in Ceyhan and is now waiting for the Turkish government's decision. SOCAR is going to process over r10MT of its own oil in Turkey for following sale of oil products in Turkish and European markets.

Thus, this will be the second after ORP in Kulevi (Georgia) industrial facility belonging to SOCAR outside Azerbaijan.

The special program was drawn up to bring SOCAR to the international company level: within this program especially important becomes the transfer of big amounts of Azeri Light oil on favorable commercial terms through Baku-Tbilisi-Ceyhan pipeline. During the recent time SOCAR performed a big work in this respect and made important steps to close refinery facilities to the coasts of the Black and Mediterranean seas. Alongside, it is suggested to implement projects on the sale of most part of Azerbaijan's Azeri Light oil through Ceyhan directly to oil refineries in different countries around the globe. At present the State Oil Company is using all the opportunities of its contract oil transportation by means tanker fleet of one of international ship-owners. SOCAR already the related contract covering direct transportation of Azerbaijani oil delivered to Turkey through Baku-Tbilisi-Ceyhan pipeline and to the global markets. As a result, SOCAR was enabled to deliver its oil right to the customer.

SOCAR is actively developing the possibilities of transporting gas from Kazakhstan and Turkmenistan via Azerbaijan and Turkey.

In a short time it drew the relevant program for gas production increase. In accordance with this program, SOCAR's annual gas production shall reach 8 billion cubic meters per annum in 2008.

Implementing the projects of developing Shah Deniz field and launching Baku-Tbilisi-Erzurum pipeline Azerbaijan acquires a new status, a natural gas exporter. The State Oil Company of Azerbaijan is actively participating in these unprecedented large-scale projects.

The prospects of Azerbaijan's gas export to Turkey look interesting as well. As a result, the State Oil Company of Azerbaijan intends to take part in the tender concerning privatization of Turkey's largest chemical company, PETKIM. Turkey supported SOCAR's intention to make the acquisition of control stock in this enterprise. Should this project get implemented, Azerbaijan will become one of major investors in the energy market of Turkey.

At present the State Oil Company of Azerbaijan is working out new routes of crude oil transportation to Europe where Romania is going to be a main connecting-link. Oil delivery to Romania can be implemented through the already existing Baku-Supsa and Baku-Novorossiysk pipelines along with the railroad towards the Georgian ports and from there by tankers across the Black Sea to Romania where SOCAR has already set up its representative office. At the same time the Azerbaijani Company plans to open its entity in Greece to deal with retail sales of oil products.

The searches for additional routes and markets are explained by the expected increase in own oil production. In 2007 total oil output in Azerbaijan will make 42-43 mln tonnes. In 2008-09 the country will produce and export 50 mln tonnes of Azerbaijani oil through the Heydar Aliyev Baku-Tbilisi-Ceyhan pipeline.

In 2010 the production level might reach 65 mln tonnes. Already today the State Oil Company of Azerbaijan plans to establish routes to Europe as the volumes of transportation of Kazakh oil through Azerbaijan will grow by that time.

The European countries that take care of their energy security are undoubtedly interested in new routes. The necessary to have new routes available was revealed after the negotiations held between the President of Azerbaijan, H.E. Ilham Aliyev and the authorities of the European Union in November 2006. At the same time, the parties signed the Memorandum on Energy Partnership aimed at ensuring security of the EU markets with the aid of Caspian oil.

New high-capacity oil producing and processing facilities in Azerbaijan will contribute to more qualified and efficient distribution of energy resources in the home market. For this purpose SOCAR is upgrading Baku-based oil refineries. At the moment SOCAR-run oil refineries meet requirements of EURO-2 standard and, at the same time, there are some parameters that enable them to meet even EURO-3 standards. The upgrading of ELOU-ABT-6 plant allows reducing the content of benzole in benzene. It is also projected to implement additional reconstruction of the hydrofining unit constructed at the catalytic cracking plant that also enables to reduce the content of benzole and sulfur in benzene. These operations will solve problems with the content of aromatic substances in the content of motor gasoline.

The construction of the largest Alkilen/Oksipro processing facility, having no analogues in the world practice, at the Heydar Aliyev Baku Oil Refinery will enable SOCAR to set up production of high-octane benzene components from liquefied natural gases. As a result, the quality of benzene will comply with European standards EURO-4 and EURO-5.

The State Oil Company of Azerbaijan also continues developing oil deposits throughout Azerbaijan. The range of fields has been developed for already several decades, but, at the same time, SOCAR maintains the output on the stable level. The activities implemented in line with the 2007 State Programme on Enhancement of Gas Output include commissioning of new platforms at the Gunashli area, drilling of new wells at 8 March and Bulla Deniz gas-condensate fields along with studying new possibilities of independent exploration at Umid, Babak, Nakhchivan structures and Karabakh, Ashrafi and Absheron fields.

Along with the enhanced financial opportunities the State Oil Company also takes care of the personnel potential. Future specialists of SOCAR are currently getting education not only in Azerbaijan but also in the leading educational institutions of Europe. The SOCAR's management also attaches high emphasis to social protection and rest.

On the whole, it is possible to say the preconditions of formation of the largest oil & gas company in the region is implemented in full force as today SOCAR acts as the leading moving force not only in the oil industry but also as a locomotive of the economic entry of big Azerbaijan business to the energy markets of Europe.